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The Game of Cloud Chicken

Stocks in this article: AMZN MSFT DELL LMT IBM

Take this press release that turned into stories like this one, in, implying that Texas has signed a cloud computing contract with Microsoft (MSFT).

The source of the actual release is Dell (DELL), and the story is that state workers will use online versions of Microsoft Office. Dell is the re-seller, and Microsoft will actually be collecting 75% less from the state than before. Dell might seem to be in poll position to build and manage Texas' cloud contract, in other words, but it hasn't yet won that contract.

Here's another example, in The Washington Post, which makes it sound like Lockheed Martin (LMT) has just gotten control of the Environmental Protection Agency's cloud. In fact, the government contractor reports it just sold the EPA on the online version of Microsoft Office.

If these press releases tell investors anything, it's that Microsoft remains a powerful force in office applications, and that as its software moves into the cloud and the deals get bigger, the names of its re-sellers shift.

A more telling story is the $267 million agreement IBM (IBM) has signed with the state of Ohio, which IBM announced Thursday. The contract will convert the state's existing data center to the use of cloud technology, the aim being to save money on operations. IBM, in short, is building Ohio's cloud.

This is what investors need to look for. When an institution buys "cloud services," that's like a chicken's commitment to breakfast, the eggs on the plate. When they hire you to build their private cloud instrastructure, they're the pig. They're committed. And that's where the big cloud money is, in the bacon.

At the time of publication, the author was long IBM.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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